In: Economics
In April approximately 22 million people filed for unemployment insurance. In March the labor force was (BLS data) 162,913,000 with Employment = 155,772,000 and Unemployed = 7,140,000. What would April’s unemployment rate be approximately?
If natural unemployment is around 4% and from Okun’s Law approximately for every 1% point change in unemployment, GDP falls 2%, how much has GDP dropped in % terms?
If real GDP in March (FRED) was $19,221.970 billion ($19.22 Trillion), what is the drop in dollar value of production?
If Forecasting Company announced that they predict the mpc has fallen to 0.5, How much Government spending will need to be injected to get back to Un(natural rate of unemployment where actual and potential output are back to long-run levels)?
March | ||
Labor force | 16,29,13,000 | |
Employed | 15,57,72,000 | |
Unemployed | 71,41,000 | |
Unemployment rate | Unemployed/Labor force | |
Unemployment rate (March) | 4.38% | |
April | ||
People filing for unemployment insurance | 2,20,00,000 | |
Labor force | 16,29,13,000 | |
Employed | 13,37,72,000 | |
Unemployed | 2,91,41,000 | |
Unemployment rate (April) | 17.89% |
For every 1% change in unemployment GDP falls 2% | |
From March to April Unemployment rate changed from 4.38% to 17.89% | |
Change in unemployment rate | 13.50% |
Change in GDP (twice of above) | 27.01% |
Real GDP in March | 19,221.97 | Billion Dollars | |
Real GDP in April (27% decrease) | 14,030.45 | Billion Dollars | |
Drop in production (difference of above) | 5,191.52 | Billion Dollars |
MPC (marginal propensity to consume) | 0.5 | |
Government spending required to get back to normal production? |
Fiscal multiplier= | 1/(1-MPC*(1-taxrate)) | |
Assuming taxes to be 30% | ||
Fiscal multiplier = | 1/(1-0.5*(1-30%)) | |
Fiscal multiplier = | 1.54 | |
To fill the drop in production by government spending (G) | ||
G = | Drop in production / fiscal multiplier | |
G = | 3,374.49 |